Contractor insurance protects a wide range of companies in Canada. You could be a large construction contractor with dozens of employees. Or you might have a one-person snowplowing firm or cleaning company. If you do any type of contracting, read on to learn about how independent contractor insurance can save you from financial disaster in the event of a major incident.
Contractors need insurance for three main reasons:
- To protect the business against a financial loss due to a lawsuit or unexpected event
- When a client requires coverage to get the contract
- When they are required by law to have insurance to be licensed to work in the field, such as electricians
What is contractor insurance?
This is an umbrella term for different kinds of insurance. Depending on the nature of your work, you may need specific coverage.
- Commercial general liability: This covers you in the event that you damage the home or building where you are working. It also includes injuries to individuals, commonly known as “slip and fall.” It may cover medical expenses and legal costs.
- Tools and equipment: This policy reimburses you if your tools are stolen or damaged in an accident.
- Specialty coverage: Depending on the type of work that you do, you may need certain coverage. One such insurance is Environmental or Pollution. It may cover you in if you are working on a contaminated site or are involved with removing a dangerous substance, such as asbestos, from a building.
What does contractor insurance cover?
As indicated, contractor insurance covers claims for damage at a job site or equipment loss due to theft or accident.
Let’s look at a couple of examples. Hanna is a licensed carpenter who specializes in building and installing custom cabinets for kitchens. While working at a client’s home, she accidentally drops one of the cabinets and it damages the marble kitchen countertop. The homeowner threatens to sue for the loss and Hanna files a claim for the incident. The contractor insurance covers the claim.
At Drake Construction Ltd., David is an employee who is required to use his own truck to carry company tools to worksites. One day, David is an accident, which damages the truck and destroys several valuable tools. Drake Construction would need a non-owned automobile policy for its employees in order to be able to make a claim for compensation.
How much does contractor insurance cost?
The cost of contractor insurance varies based on a number of factors. A basic general contractor insurance policy for a small company with relatively low risk can cost as little as $450 with Zensurance. This provides up to $2 million in liability coverage.
Some of the factors that can increase independent contractor insurance premiums include:
- Annual revenues: Large contractors working on a number of big projects will need more coverage.
- Number of employees: A one-person company carries less risk than one with dozens of employees.
- Type of business: Some trades have a higher risk of incidents. For instance, roofing companies may have more claims than a firm that does interior painting.
Your commercial insurance broker will be able to help you determine what kinds of policies you need as well as the dollar amount of coverage.
What are the requirements for contractor insurance?
Many trades are required by law to have contractor insurance. For instance, in Ontario the Electrical Safety Authority licenses electricians and demands that applicants have at least $2 million in coverage. Check your provincial requirements for your particular sector.
In addition, most provinces require workplace safety insurance to cover employees injured in an on-site accident. In Ontario, the Workplace Safety and Insurance Board demands that contractors participate in its insurance plan.
Do contractors need professional indemnity insurance?
First, let’s look at what professional liability insurance covers. It is commonly known as “errors and omissions” insurance. That means that if you make a mistake, or fail to consider an important aspect of the project, you are protected if you are sued by a client.
Here’s an example. Raymond Contracting and Engineering is based in Barrie, Ontario. Its owner, David Raymond, is a structural engineer. In addition to constructing new buildings, Raymond advises on repairs and renovations to existing structures. He doesn’t do the actual work but he does consult on how a project should be approached. In this case, Raymond should have professional liability insurance to protect him in the event that there is damage and his advice results in construction that is unsafe or shoddy.
Contractors that are only involved in constructing or renovating buildings do not usually need professional liability insurance.
Are subcontractors covered under contractors insurance?
Generally, subcontractors aren’t covered. Your employees are included in your general contractor insurance but subcontractors are in a different category. Therefore, it’s essential that your subcontractors have their own insurance and be able to provide you with details about the coverage.
If your subcontractors don’t have insurance – or it proves to be inadequate – you could be left footing the bill in the event of a lawsuit or incident causing costly damages.
Many contractors are required by law to have contractor insurance. Others may not be legally obligated, but it’s still important to have the appropriate insurance coverage in the event that an unexpected incident occurs. The independent contractor insurance premium is a small price to pay for peace of mind and to protect your business from financial disaster.
